An announcement on the People’s Bank of China’s website on Monday that it was to ban the practice of raising funds for investment by selling new cryptocurrencies hit the value of bitcoin hard on Monday, numerous media organisations reported, with CNBC saying it fell by US$200, to around $4,350 per bitcoin.
Bloomberg said bitcoin “tumbled as much as 11.4%, the most since July”, and that the ethereum cryptocurrency “was down more than 16% Monday”, citing data from Coindesk.
The price has, however, been recovering in trading on Tuesday, the Coindesk data shows.
As reported here yesterday, China’s central bank caught the global cryptocurrency market by surprise yesterday when it announced that so-called “initial coin offerings”, or ICOs, were illegal, must be stopped and refunds provided, just after South Korea’s regulator announced its own plans to step up regulation of cryptocurrencies.
Explaining its decision to take action, South Korea’s Financial Services Commission (FSC) said it believed that the recent transaction volume and volatility of digital currencies had become “excessive”, according to a report published on Sunday by the Yonhap News Agency.
The moves by the South Korean and Chinese regulators to tighten up scrutiny of cryptocurrencies came as the value of a bitcoin has been surging, and media speculation on the future of such currencies, and their potential value to investors, has been widespread. The bitcoin is the world’s best-known cryptocurrency, having been invented, according to legend, by an unknown programmer or a group of programmers who called themselves Satoshi Nakamoto.
‘May be short-lived’
In its report on the Chinese ban on ICOs, the US CNBC media organisation, cited cryptocurrency industry experts as saying that the drop in the price of bitcoin was likely to be “shortlived”, and noted that this wasn’t the first time China’s regulators had sought to crack down on cryptocurrencies.
“This type of news is ‘universally’ negative sentiment, within the crypto space, so we are not surprised to see a dip on all assets today,” CNBC quoted Fran Strajnar, co-founder and chief executive of a data and research company called Brave New Coin as saying.
“We do not see this to be a lasting issue.”
As reported, in September 2016, the Channel Island of Jersey introduced its own virtual currency legislation, which it said was designed to create a “regulatory sandbox” aimed at enabling “exchangers” with annual turnovers of less than £150,000 to be able to test their virtual currency exchange delivery mechanisms in a live environment, without the normal registration requirements and associated costs.
A few months later, the Channel Islands Securities Exchange – now known as the International Stock Exchange – announced that it was admitting to its official list a regulated bitcoin fund, Jersey’s Global Advisors Investment Fund plc.